How The Merger Of Two Health Care Giants May Affect Your Wallet

Express Scripts and Medco Health Services say their merger will help control prescription drug costs. But many prescriptions may only be available by mail, which may not sit well with some consumers.

Sean Locke
/ iStockphoto.com

Listen

Listening...

/

Originally published on August 23, 2011 11:42 am

You probably haven't heard of either Express Scripts or Medco Health Services, but their plans to merge in a $29 billion deal, announced last month, may have an impact on your pocketbook.

The two companies are giants in the health care industry. They're what's called pharmacy benefit managers, or PBMs: They manage the prescription drug coverage that health insurance companies offer to large organizations like corporations and unions. The companies say the merger will help them control health care costs for consumers. But will bigger really be better for consumers?

The PBM model can result in cost savings for customers, says Lisa Jackson, an administrative assistant with the Granite City, Ill., chapter of United Steel Workers who helps thousands of union retirees navigate the world of health insurance.

The people she works with — former employees of the old National Steel plant in Granite City — get prescription drug coverage through their union, and the benefit is handled by Express Scripts. Jackson says some of her retirees are saving as much as $150 each time they fill a prescription over what they would pay if they were getting the same prescription through the federal Medicare drug benefit.

"These people that are on a fixed income," she says, "they should not have to decide, 'Am I going to take my medicine, or am I going to heat my home or cool my home?' "

But there's a catch. Those cheap drugs are only available through the mail, and Jackson says that drives some of her retirees away from the Express Scripts plan. "People would just rather have personal contact with a pharmacist," she says.

Those restrictions, though, are just one of the ways companies like Express Scripts and Medco control the costs of prescription drugs.

The best tool PBMs have for controlling costs is aggressively pushing the use of generic drugs, says analyst Dan Mendelson. He worked on health care during the Clinton administration and currently runs his own research firm, Avalere Health.

"A lot of major pharmaceuticals have gone off patent, and PBMs have been largely responsible for how rapidly those generics get switched over," he says. "Many plans actually give generics for free. Others will charge a co-pay of five bucks, in contrast to the copay on a branded medication, which can be between $30 and $60."

Express Scripts chief medical officer Steven Miller says his company plays a key role in keeping down copays. "Drug inflation may be going up 10 percent," he says. "Our average copay went from $12.47 to $12.15" — savings he calls "pretty remarkable."

The planned acquisition of Medco would be the eighth merger for Express Scripts, which says every single deal has lowered costs for consumers. The company will likely emphasize that point to government regulators, who still need to approve this deal.

"During the time it takes for you to actually have that prescription ready to be picked up," he says, "the PBM is back behind the scenes, making sure that this isn't a duplicative prescription, making sure there aren't dangerous interactions."

Hoadley says his biggest concern is to what end the combined companies will use their gigantic market share.

The companies hope to complete the merger early next year.

Transcript

RENEE MONTAGNE, host:

Economic uncertainty hasn't stopped corporations from announcing mega-deals. One of the biggest mergers came last month, when a company called Express Scripts said it planned to buy MedCo Health Services for $29 billion. Both companies are major players in the health care industry. They are what's called pharmacy benefit managers, which means they help insurers and employers administer prescription drug plans. The two companies say the deal will help them over better prices to consumers.

St. Louis Public Radio's Rachel Lippmann reports on whether bigger really would be better.

RACHEL LIPPMANN: For the last eight years, Lisa Jackson has been helping thousands of retirees navigate the often-confusing world of health insurance.

Ms. LISA JACKSON: It takes us a long time of holding their hand and walking through it with them month after month.

LIPPMANN: Jackson's retirees are former workers at the old National Steel plant in Granite City, Illinois, and they get prescription drug coverage through their union. The drug benefit is handled by the St. Louis-based company Express Scripts.

Jackson says Express Scripts employees are pleasant to deal with, and she's been able to easily resolve most of the glitches that happen with any bureaucracy. And she says the company - a pharmacy benefit manager helps her retirees save money. Some are paying $150 less than they would getting the same prescription through the federal Medicare drug benefit.

Ms. JACKSON: These people that are on a fixed income, they should not have to decide: Am I going to take my medicine, or am I going to cool my home?

LIPPMANN: But there's a catch. The cheap drugs are only available through the mail, and Jackson says that drives some of her retirees away from the Express Scripts plan.

Ms. JACKSON: Your Medicare Advantage plans, I've had them stay with that as opposed to going with coverage that would cause them to have less out-of-pocket expenses. People just would rather have personal contact with a pharmacist.

LIPPMANN: Those restrictions, though, are just one of the ways that companies like Express Scripts and Medco control the costs of prescription drugs.

PBM's also aggressively pushed the use of generic drugs, and analyst Dan Mendelson says that's their best cost-control tool. Mendelson worked on health care during the Clinton administration and currently runs his own research firm, Avalere Health.

Mr. DAN MENDELSON (Avalere Health): A lot of major pharmaceuticals have gone off patent, and PBM's have been largely responsible for how rapidly those generics get switched over. Many plans actually give generics for free.

LIPPMANN: Express Scripts chief medical officer Steven Miller says his company plays a key role in keeping down co-pays.

LIPPMANN: The planned acquisition of Medco - another large PBM would be the eighth merger for Express Scripts, which says every single deal has lowered costs for consumers. The company will likely emphasize that point to government regulators, who still need to approve this deal.

Researchers like Jack Hoadley at Georgetown University's Health Policy Institute say it's hard to tell exactly how much PBMs lower costs because the data isn't readily available. But he says they do offer other benefits.

Dr. JACK HOADLEY (Research Professor, Georgetown University's Health Policy Institute): During the time it takes for you to actually have that prescription ready to be picked up, the PBM is back behind the scenes making sure that this isn't a duplicative prescription, making sure there aren't dangerous interactions.

LIPPMANN: Hoadley says his biggest concern is to what end the combined companies will use their gigantic market share, but adds it's too early to determine the impact. The companies hope to complete the deal early next year.